Microsoft hurts own market dominance - WPA, WGA

[ed. note: this was originally posted on 6/30/2006 09:21:00 AM]
There were stories going around about Microsoft having the ability to 'pull the plug' on XP installations if Windows Genuine Advantage (WGA) is not installed on a user's machine:

Now, this may turn out to be FUD and disinformation, but if this is even partly true... very bad move on Microsoft's part. Even if it's totally untrue -- Microsoft ought to expect that their actions with Microsoft's Product Activation (WPA) and WGA expose them to broad suspicion about their motives.

In an attempt to maximize revenues (by 'preventing' piracy or punishing pirates) Microsoft risks alienating current customers and elevating the suspicion level among legitimate users - and undercut their own market share and security (some misinformed people, including demagogues in the government, call it a 'monopoly').

I assert that when people were able to install a single licensed copy of Windows (95, 98, 2k) or Office 2000 on as multiple systems with little or no fear that they would be caught or prosecuted, these acts of 'piracy' ensured that there was reduced opportunity for an alternative OS or office applications to be installed on a majority of systems. This contributed to Windows and Office being a de facto standard, since just about everyone was using it everywhere.

After all, why would someone even consider installing a competing OS (Microsoft haters, Apple devotees, and open-source lovers notwithstanding) when they can put that copy of Win2k on three machines at home or in a small office, for the cost of a single license or 'free' if it was included with one of the machines?

Now, starting with Windows XP and Office 2003 you have to purchase a copy for every install (or try to hack, or find a hacked copy of XP, or try using a pirated key, or use a keygen, or whatever).

What is the real-world effect? Those who would have just installed XP on several machines with little thought, are now forced to look at the cost of purchasing three, five, ten, or whatever licenses for XP (even if they can do this at a discount, it still costs them money - which will cause them to consider alternatives.)

So now, rather than ensuring that there is a copy of Windows (or Office) on nearly every machine on the planet, Microsoft opens the door for -- indeed, encourages -- people to consider other alternatives. The free alternative, is, you know... Linux. And Linux is becoming more appealing every year.

Microsoft and other software companies apparently believe that if someone is forced to purchase a license for every copy of a product they ever installed, that all (or most) of that 'lost revenue' will automatically, magically come flowing in to the company coffers.

I don't know of too many people who spend their own money to buy a copy of Office 2003 to use at home - if it's pre-installed on a new machine, then that's the one they use; otherwise, Office 2000 seems to be surprisingly popular (Office 2000 is the one that doesn't have an activation scheme...)

The truth is: the majority of home users or small business people who wouldn't pay you for your product if they can pirate it are unlikely to pay you when you prevent them from using it for free. They installed the software because it was convenient and 'free'.

I view WPA and now the WGA program as major strategic errors - if Microsoft intends to maintain market dominance. History may show that these policies were two very large nails in Microsoft's coffin.

This is an issue that raises lots of arguments because Microsoft has certainly benefited from piracy, which has helped to create a bigger market for Windows software and also made Microsoft file formats ubiquitous.

The company has certainly looked at a number of ways of trying to make Windows more affordable in less developed countries. Steve Ballmer once told me, to paraphrase, that if Microsoft could get some money for Windows, this would be better than getting no money, which is the case today.